Wu's visions of power

TYCOON Gordon Wu Ying-sheung's involvement with the electricity-generating industry started in the early 1980s not with a power station but with a hotel project. His firm, Hopewell Holdings, built the international-standard China Hotel in Guangzhou at a time when the city was plagued by power cuts. The entrepreneur calculated that his hotel alone consumed two per cent of the city's entire electricity supply. ''It dawned on me that if there was a blackout our guests wouldn't like to be toting their bags up to the 19th floor, or engaging in candle-lit dining every night. So I thought: 'This is a problem. How can you invest US$120 million in a swanky hotel before ensuring that you have electricity for the kitchen, the elevators and the air-conditioning','' said Mr Wu. The short-term solution was a deal with the city authorities to guarantee supply; the long-term answer was a move into energy production. A decade later Mr Wu is behind the massive spin-off of Consolidated Electric Power Asia (CEPA). The combined Hong Kong and overseas offer will take two years and raise $6 billion. The offer of the Hopewell subsidiary kicked off with a roadshow in Tokyo on Friday. Despite the sophistication of the offer, which is being co-ordinated by Peregrine Capital and Wardley Corporate Finance, Mr Wu gibes the impression that his heart is withthe engineers rather than the financiers. His vision is of a string of standardised power stations across China and the region; all units will be of 660 megawatts, which he believes is the most efficient size, and all will be built to the same design to cut costs. ''I got the inspiration from Henry Ford,'' said Mr Wu. Mr Wu said he had already signed 14 letters of intent to build power stations in the Pearl River Delta. ''We will get the financial deal [the flotation] squared away and then we go full speed forward. Getting the business without finance is like when I was young getting a pretty girl saying 'why don't you call me to go out to dinner.' I would have to call my old man and get the money to afford it first,'' said Mr Wu. In his customary folksy manner he explained how in 1984 he negotiated his first power station, Shajiao B, in Guangdong province. He was partnered in the project by Japanese construction firm Kanematsu. ''I went up to Beijing for approval and that is where the trouble came. I went to dinner with Li Peng and we discussed it. He said I was making too much money and I said: 'Vice premier Li, I don't believe so because you have got to have adequate returns for international bankers.' Finally, I said: 'If you think I am making too much money why don't you sit on my side of the table and participate.' And he said 'yes' right away.'' Chinese parties took 45 per cent in Shajiao B, leaving Hopewell with 50 per cent and construction firm Kanematsu with five per cent. The power station was negotiated on a 10-year build-operate-transfer basis and reverts to China in 1998. Mr Wu said the last payment on the loan for the project would be made in April 1994 and the power station would generate annual profits of $700 million after that. CEPA already has plants in production with capacity of more than 1,000 MWs. Shajiao B (in which it has a 50 per cent stake) in Guangdong province has two 350 MW units, Navotas I (50.1 per cent) in the Philippines has three 70 MW units and Navotas II (100per cent) has one 100 MW unit. It also operates nine 30 MW power barges in the Philippines. Plants under construction will account for another 2,715 MWs. There will be three 660 MW units at Shajiao C (27 per cent), which opens in September 1995, and two 367.5 MW units at Pagbilao (49 per cent) which starts operations in January 1996. Mr Wu said parent company Hopewell Holdings had embarked on a new strategy to sell off Hong Kong property assets and use the funds for expansion in China. Hopewell recently sold Wu Chung House and Hing Wai Industrial Building for $2.11 billion which accounted for about 74 per cent of the 1993 financial year's operating profit. Analysts see the sales only as a way of tiding over profits until revenue from the Guangzhou superhighway starts to kick in. ''A lot of people don't understand what we are trying to do now,'' said Mr Wu. ''I look at the escalation in prices. Hong Kong property has gone from $20 per sq ft to $5,000. I ask myself when is the next time it is going to double, maybe a long time, maybe never. It's a very flat growth curve from now, so isn't it time that I started liquidating and going back to something in China where I enjoy this big growth curve?'' ''Why should I risk money in Hong Kong property and expect at best to double whereas if I made a switch I could expect 10 times.'' He added: ''Analysts don't understand that like a football manager I am trading off the ageing players - it could be Guilit, it could be Van Basten - and I am now discovering the young players to replace them so I can enjoy a future of great growth.'' Mr Wu expected the first phase of the superhighway to generate $3 billion annually from the second year of operation. Revenue will come from an estimated 30,000 vehicles a day paying the toll from Hong Kong to Guangzhou (private cars will be charged $100) plus rental income from property developments at interchanges. The road is a joint venture with the Guangdong Highway company. The project also involves a ring road around Guangzhou. Phase two will be a superhighway on the other bank of the Pearl River from Guangzhou to Macau. ''You get a franchise to run the superhighway, or in the 19th century a railway or in the 18th century a canal. But there is more than the toll, you make money by picking up land at the junctions,'' said Mr Wu. Mr Wu had previously said he would leap into Victoria Harbour if the superhighway was not completed by September 1993, a pledge he intended to honour. But he was confident the highway will be completely open well before the bankers' deadline of June 1994. Most sections are scheduled for completion by the end of this year. But to keep the project on time has meant a punishing schedule, with the Hopewell chairman spending most of his time on the highway site personally directing operations. He and his wife, Mrs Ivy Wu Kwok Sau-ping, spend most weekends literally on the road. Mr Wu said he had never worked harder in his life. Critics say the thin management structure at the top of Hopewell has meant the firm has had little time to concentrate on other projects, such as the Bangkok mass transit network and the Hong Kong International Trade and Exhibition Centre in Kowloon Bay, which is due for completion next June. ''He runs Hopewell like a takeaway; he is cooking in one room and taking orders and washing the dishes all at the same time,'' said one critic. He countered that he liked to keep his team lean. He had tried hiring large teams of MBAs when he first moved into the power station business but politicking and bureaucracy had crept in. Mr Wu conceded that personal pride was involved in his bid to get the superhighway completed ahead of schedule, despite problems which have included protracted land negotiations with local Chinese authorities and a highly publicised row with the superhighway joint venture partner. He added: ''It is more than pride. I think I am one of those people who is driven by responsibility. If you take money from the bankers you have to deliver what you have promised. ''Besides, my heart is in the highway. I would rather be out there than directing operations from the office.''